Bitcoin futures trading begins boosting price amid bubble warnings
It seems there’s no stopping Bitcoin as futures trading opens in Chicago Board Options Exchange (CBOE). The price surged once again to over $17,000, matching the record reached last week.
Futures Trading for Bitcoin with CBOE proved so popular that the company had to not only release a statement about the surge of popularity slowing its website down, but even halt trading twice, as the Guardian reported. As major banks and regulators continue to treat Bitcoin and other cryptocurrency with speculation and caution, the businesses opening themselves up to the future of currency are evidently reaping the rewards now. Goldman Sachs and JPMorgan Chase have – and continue – to be publicly critical of cryptocurrency. Particularly Jamie Dimmon of JPMorgan having previous referred to Bitcoin as a ‘a fraud’.
What is futures trading?
For those new to traditional, regulated investment structures, then futures trading may be a unknown term. Futures trading is a method by which banks, investors and brokers can essentially bet against the future value of any given commodity. Initially, futures contracts and futures trading was built upon agriculture in which investors predicted and then invested based on those predictions of the success of crops and live stock. Since then though, futures draws on almost anything that has value with particular weight on crude oil, precious metals and stocks.
What’s the impact on Bitcoin and the cryptocurrency market?
With investors bidding against the future price of Bitcoin being significantly higher in January than now – that has pushed the value of Bitcoin up now. This is how futures trading can impact the present moment and why it is such an influential method of financial investment.
Bitcoin’s success, succored by opening on futures, adds to the overall success of cryptocurrency, which has now reached a historic combined value of $500m
The combined crypto asset market cap has breached $500 Billion pic.twitter.com/v23p2uF86S
— Jameson Lopp (@lopp) December 12, 2017
Is it just a bubble?
However, amid all this excitement, doubters have warned of a bubble forming – and bubbles are liable to pop. Grant Spencer, Reserve Bank of New Zealand’s acting governor, said: “It looks remarkably like a bubble forming to me. Over the centuries we’ve seen bubbles, and this appears to be a bit of a classic case. With a bubble, you never know how far it’s going to go before it comes down.”
The UBS analyst, Paul Donavan, was more measured, saying: “Should investors bet against the bubble? That is high risk. UBS believes cryptocurrencies are a bubble. However, being able to short a bubble does not make the bubble burst at once. Cash settled futures contracts on tulip bulbs began in Holland in 1636. The tulip bubble did not burst until February 1637. Bubbles are by definition irrational. Predicting when a bubble will burst cannot use rational analysis. Ignoring a bubble is the best course of action.”